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Business

Keeping Low Wages in (Europe's) Bounds

Worried that the EU expansion could cause more jobs to vanish, Germany's unions have been urging their colleagues in Easter Europe to take a stand against wage-dumping.

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German industrial production is increasingly outsourced eastward

Western firms' greed on the other hand seems to know no bounds, Michael Sommer, the head of the German Trade Union Federation, said at a press conference with Milan Stech, a Czech union representative.

"They always threaten me that they'll move to the Czech Republic," Sommer said. "Then they threaten Milan that they'll move further east."

Indeed, the Ukraine, Romania and Belarus have already provided a welcoming, and cheap home for many Western companies -- from textile firms to software developers. But favorites of western European companies looking to cut labor costs continue to be countries just a short trip away. With eight former eastern bloc countries now in the European Union, the ease with which Western companies are able to move east is alarming European union leaders.

At the press conference yesterday, Sommer and Stech warned Eastern European workers against offering a cheaper alternative, saying it was a no-win situation long term.

"That would be the Asian way and Europe has no future down that path," Stech told reporters.

Unions weak in the east

The two union representatives are calling for Europe-wide worker-friendly wage and labor policies. They warned that, in the long run, quality, not lower cost would ensure employment for Eastern European workers.

Western union leaders have been carrying that message eastwards since the early 1990s, when they began advising fledgling unions that emerged after the fall of the iron curtain. But evidence suggests Eastern European workers haven't really been listening.

In Estonia, which boasts a large service and high-tech sector, only 15 percent of the workforce is unionized. In Slovenia and the Czech Republic, the numbers hover around 42 percent.

Germany as a "bazaar economy"

German companies are taking advantage of this, according to Hans Werner Sinn, an economist with the ifo institute in Munich. Around two-thirds of Germany's growth in industrial production in the past eight years is attributed to the work being done abroad for German companies and then delivered into Germany.

Sinn said in an interview with Die Welt that Germany was developing into a "bazaar economy" that was delivering cheap, but good products to the rest of the world that were largely made in "Eastern European hinterlands."

He said German wages, especially in the former East, need to sink "somewhere between Poland and the average in the West."

Sommer on Monday argued against that thinking. German companies would doom themselves by constantly cutting costs, he said. "Companies that only look at the cost factor at one point land in Bangladesh, if they're around at all," he said.

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